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Topics Covered
- Crowdlending
- Investing
- Shareholders
- Starting a business
- Bank financing
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Talk Citation
Aernoudt, R. (2023, October 31). Love money and the crowd [Video file]. In The Business & Management Collection, Henry Stewart Talks. Retrieved October 6, 2024, from https://doi.org/10.69645/CJTP7388.Export Citation (RIS)
Publication History
Other Talks in the Series: Key Concepts in Financial Management
Transcript
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0:00
My name is Rudy Aernoudt.
I'm Professor at the
University of Ghent.
The topic in the field
of financial management
today is Love Money
and the Crowds.
0:15
Let's start by having an
overview about equity.
When we speak about equity,
we speak on the one hand about
private equity and the other
hand about public equity.
Public is about stock,
that be the next course.
Private equity, we make
a distinction between
the formal private
equity, such as
venture capital and
the informal capital,
such as business angels,
and at the same time, friends,
fools and families,
and the crowds.
Today, the topic will be
two parts of informal
venture capital,
being friends, fools, and
family and the crowds.
0:51
When we speak about
love money, in fact,
the origin for once
is based in China,
where you have
what we call, Hui,
mean something like
being at home.
In fact, the principle was
that at Friday evening,
you go into your favorite pub.
The money you earned
during the week,
you put it in one hat,
and those who has projects
are looking for money.
They put a small post-it
in the other hat saying,
I'm looking for 100 Euros
and I offer friends 7%.
At the end, you
empty the box with
the money and you distribute
at those who offer most.
If you don't get
the money you want,
you can come back next week.
This system was called
Hui and is still
applicable today in
some villages in China.
1:36
This was in fact the basis
of what you call Love Money.
Of course, love and money at
first sight doesn't go
along with it means, in
fact, that the money is given
to the one who has a
project based on relation.
It's relation between the
investee and the investor
which was not the case in
business angels and which is
not the case with
venture capital.
Of course, here we
are speaking about
small amounts of money which are
mostly used and financed at
the beginning or even before
the start of a company,
and mostly in the
form of a loan.
It is marginal in the way
that small amounts of money,
but to give an
example, in Europe,
60% of all companies starts
by the first investment,
which is love money.
When we speak about love money,
there is a relation between
the investor and the investee.
This relation can be
based on a friendship,
or it can be family,
or it can be what
you call fools,
meaning people who has
no relation, but just
want to invest the
money in a company,
which even does not exist.
That's why we speak about
the triple F (FFF) money,
friends, families, and fools.
The global
entrepreneurship monitor,
which is made by
the Babson College
is, in fact, each year
trying to see where does
the money come from.
As you can see on the slide,
the most important source of
financing is close family.
Almost 50% of all the love money
is coming from the
family relation.
The second big source is
colleagues, friends,
or neighbors,
which accounts for
35% of the people
and you see the fools are only
6%, just to give an idea.